https://www.economist.com/europe/2022/09/05/europe-scrambles-to-protect-citizens-from-sky-high-energy-prices

Europe is currently facing high inflation mostly linked to rising energy prices. Rising energy prices are a result of several factors including embargos on Russian oil, elimination of "un-green" energy sources, green energy shortfalls, and a rapid spike in demand for energy, goods, and services coming out of a pandemic. European countries, including members of the European Union (EU), are launching strategies to control inflation and rising energy prices. The effectiveness of many of the proposed strategies is speculative and some may have dire consequences for commerce and the European economy.

Cultural

Generally, the culture across Europe varies from individualist to collectivist. The impact of inflation and the economic downturn could impact industries differently based on where each country's culture falls on this spectrum. For example, the impact of policies aimed at reducing inflation by capping energy profits while restricting consumption would be different in a collectivist culture, as in Bulgaria, versus more individualistic like the UK. The collectivist cultures are likely to view these policies as for the greater good and thus, their compliance is likely to cut into energy firm profits. On the contrary, targeting energy firms this way in the UK and impeding on personal needs are likely to raise concerns of over-interventionism and people are less likely to comply with consumption restrictions. This is likely to lead to higher energy prices and favorable conditions for energy firms.

The EU also has a widely shared "green" culture. So, while moves towards green energy have contributed to the current crisis. The people are still likely to favor clean energy and related industries even if it means higher costs and continued reliance on foreign-owned firms, like solar cell producers from China.

Political/Legal

The current political landscape is likely to pose challenges for international firms doing business or wishing to do business in Europe. For example, embargos on Russian oil are driving up energy prices, which drive up costs and disrupt supply chains. Some policies aimed at reducing inflation, like tax hikes and profit caps are likely to make markets less free-trade friendly.

Economic

The general economic downturn in Europe is affecting inflation, low investor confidence and slowed economic growth. Raising interest rates to curb inflation is likely to slow economic growth and therefore, reduce market opportunities across most sectors. Financing measures with national debt is also becoming a problem. For example, France is nationalizing a largest energy producer which is increasing its national deficit. Meanwhile the country has lost its position as a net-energy exporter and is now at the mercy of price-gouging foreign firms. Nationalization of energy has been disastrous in countries like Venezuela. A sharp economic downturn in the EU could lead to a global economic crisis with international firms being heavily invested in Europe.

Geographic-Natural

Some regions are limited in access to energy resultant of the current Russia/Ukraine conflict and other policy-related factors like ditching fossil fuel for renewable energy. While this is mostly a political matter, the problem can be compounded based on geography. For example, with Russian oil being blocked, pipelines are not in use and EU countries are now more reliant on natural gas that must be shipped to energy producers. Landlocked countries and those not along large trade routes are likely to suffer from higher energy prices which will impact commerce and international trade.

References

The Economist. (2022). Europe scrambles to protect citizens from sky-high energy prices. The Economist. Retrieved September 16, 2022, from https://www.economist.com/europe/2022/09/05/europe-scrambles-to-protect-citizens-from-sky-high-energy-prices

Koutsokosta, E. (2022, February 11). Why is inflation so high in Europe & what can be done to slow it down? euronews. Retrieved September 16, 2022, from https://www.euronews.com/my-europe/2022/02/11/why-is-inflation-so-high-in-europe-what-can-be-done-to-slow-it-down

Rapier, R. (2022, April 14). Charting the decline of Venezuela's oil industry. Forbes. Retrieved September 16, 2022, from https://www.forbes.com/sites/rrapier/2019/01/29/charting-the-decline-of-venezuelas-oil-industry/?sh=6f7a48954ecd

Q.a.Do you believe the news about the country reflects the characteristics, opportunities and/or challenges for that world region as illustrated in chapters 9, 10, or 11 of the textbook? b.Explain why or why not?

c. what do you think the foreign firms operating in the country should do to address the implications and impacts of the reported events?

d.What do you think the firms should NOT do? Why?